Retirement Living
I know a few things about you.
- You feel too young to consider living in a ‘retirement village’ because that’s for old people.
- You don’t have time to even think about retirement.
- You don’t believe you will ever be able to retire.
- You think you will die before you are able to retire.
How do I know these things? They’re not on wikipedia that’s for sure. It’s because I’m one of you. I’m in your generation facing the same everyday burdens and decisions as you.
Because I know these things I’m going to ask you to take five minutes away from looking after everyone else and just think about retirement for a minute OK?
Get a piece of paper and write down the answers to these questions:
- Where do I want to live in retirement?
- What type of housing do I think I want?
- How much money do I want to live on?
- Do I want to travel and if so where do I want to go?
- What is my health insurance plan in retirement?
OK. Now you have some answers, you’re halfway to planning your retirement living strategy. Wasn’t so hard right?
In terms of where you want to live, I’m guessing you probably want something low maintenance but still room for greenery if you want some. You’ve had it with mowing lawns – mostly – but still like the idea of lawns and a garden. I hear you die hard gardeners and lawn enthusiasts yelling at me that you enjoy getting out and taking meticulous care of your lawn. I get it. You do you. If you want that in your life for the next 50 years, put that in your retirement living plan.
You also probably want to still be close to family. This is probably not going to work out I’m afraid. It is likely that your kids will be spread all over the world or interstate so you really just need to start thinking about where you want to live.
How much money do I want to live on? This is the stickiest question of them all. What are you living on now? More importantly though, What can you survive on? The difference between these figures can mean 5 years of working. We think we want to live on what we are earning now because anything less is unthinkable, and everything is just going to continue to go up right? Maybe.
Take away all the support you give to family because this won’t be continuing once you’re retired. Then take out transport costs to work. This may mean getting rid of a whole car including registration and insurance costs. Then take away all your lunch money and coffee money – because you won’t have that habit when you’re retired. Take away your clothing expenses because you don’t need to dress for work anymore.
Take out rent and/or mortgage costs. This will only apply if you’re looking at settling into one of those over 55 communities (which I am not looking forward to but they think it’s what we wanted so I don’t know if there will be much choice about it tbh).
Also take away your superannuation contributions and savings money because you’ll be where you have been saving up for.
Now add in some leisure activity costs because you’ll be spoiled for choice at all the new and exciting hobby and entertainment choices that will now be available to you.
So at this point, I’m pretty sure you’ll be close to about 50-75% of what you’re living on now. This is a good thing.
Take that figure and divide it by 0.04 and you’ll have your total gross amount of money you need in the bank to live happily ever after. So for example $50,000 / 0.04 = $1,250,000.
I’ll give you a minute to get your breath back after your panic attack.
It’s a hell of a lot of money and most of us won’t get anywhere close to it.
So now we know how much we need, I’m guessing the travel plans may have been taken off the table but there is still a way you can do this so don’t despair right now.
Healthcare is going to be the biggest expense throughout your retirement. Ageing is a thing and our bodies just start to play up. Plus we need to do all that screening for deadly diseases and they cost money my friend. In my estimation it would be fair to allow 30% of your living expenses to go straight to healthcare costs and that is probably way too conservative but it’s what I’m going with in my denial of the future financial needs of my body.
Now I know you’re probably thinking, well I’ll probably die before I even have to worry about it – which is possible – or – well I’ll just keep working until I die and maybe take some long service leave for my travel plans – also possible. In Australia the likely retirement age has been moved to 70 by the government and the insurance sector. Where we will be employed is a whole other thing entirely but go government for your optimism.
The most important thing, and I cannot stress this enough, is that you have to get your head out of the sand about this. Even though we feel like we’re never going to make it and it’s more impossible to retire than it was to get our first house (I worked four jobs at one point to pay the mortgage) we have to start to plan anyway.
Even if we don’t make it, we’ll get a lot closer if we have some sort of plan. Getting 25% of the way there is better than 0% and finding ourselves totally vulnerable and without pension.
Side note – my dad told me that by the time I get to retire the aged pension will not be there. At the moment you can’t claim it until you’re 70 (I think – could be wrong about that) but it doesn’t really matter anyway. It’s going to be negligible even if it does exist so you cannot, in any way, shape, or form, depend upon it to get you out of this mess.
Don’t factor it into your financial figures at all. If you get it, it will be a nice bonus but most of us won’t qualify and if we do it will probably only cover bread and milk.
I know you’re just about crippled with fear right now. After it subsides, make a plan – no matter how small. Find an extra $50.00 a month or a week to stash away into some sort of savings. Find other ways to make money other than your employment (if you’re lucky enough to still have your job and chances are – you’re going to lose it before you retire).
It’s a terrifying time for us to be alive and to look to the future. But we have to do it. We have to have a back up plan to our Plan A’s because our Plan A is not going to get us there.
Now I’m going to eat some chocolate and calm down a bit and review my own plan. By the way, writing these articles is part of it. What do you know that our generation could benefit from? Just a thought.
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